Compounding Our Interest: Are We Talking 'Real Money' Yet?

Compounding Our Interest: Are We Talking 'Real Money' Yet?

To borrow from the famous “a billion here, a billion there” remark, “pretty soon you’re talking some real money.

The annual revenue cited in recent reports for the e-bike industry sounds like small change compared to the U.S. electric utility industry’s annual electric sales revenue, which is above the $300 billion mark. But to borrow from the famous “a billion here, a billion there” remark, “pretty soon you’re talking some real money.”**

Since the EV market is several times larger than the e-bike market, and since EV markets have been growing rapidly we should take a remark made by Albert Einstein to heart, when it comes to compound interest:

einsteinCompound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.

— Albert Einstein

A Bloomberg news article on Feb. 2, 2017, “Inspired by Tesla, This $10,000 E-Bike Is for Daredevils in Disguise,” references a Navigant report that pegs current e-bike sales at $15.7 billion and anticipates a $24.3 billion market by 2025. But considering that electric automobile sales overall are several times larger than those e-bike figures, and have been enjoying significant double-digit growth, utilities stand to benefit from the overall EV market in numerous ways—not just based upon the benefits for the grid and for utilization of off-peak power to charge loads, and not just based upon the incremental increase in electricity sales, but also based on the economic benefits for utilities with EV related businesses in their territories.

A battery storage related Bloomberg piece earlier in the week has a headline that either says it all, or says too much, depending upon your point of view: “Tesla’s Battery Revolution Just Reached Critical Mass: Three new plants in California show how lithium-ion storage is ready to power the grid.” Whether you agree with the headline or not, even naysayers should be paying attention to the quote the article provided from a key utility executive: “For now, gas peaker plants still win out on price for projects that aren’t constrained by space, emissions, or urgency, said Ron Nichols, President of Southern California Edison, the California utility responsible for most of the biggest battery storage contracts. But that may change in the next five years.”

Returning to our simplistic “Einsteinian” view, while five years may seem like a long time—it is all relative—and five years is a blink of an eye for some of our major capital and IRP planning processes. In fact, at the 25% to 35% annual growth rate associated with some recent EV market size predictions, 5 years is sufficient time for EV markets to double or triple in size—per the two pertinent interest rates shown on the table below:

[Editor’s Note: The “Billion here, billion there” remark, was attributed to Senator Everett Dirkson, but he purportedly did not say, but welcomed the misattribution, of the second part about how “pretty soon you’re talking real money” ]

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